The good news: retailers did take advantage of inflationary costs during the early part of our market study measuring period (April 1, 2011-March 31, 2012) and experienced some solid identical store increases. The bad news: what doth rise, must ultimately fall. As commodity pricing has settled over the past few month, those quick gains were no longer available, making that temporary cushion virtually evaporate and bringing most retailers back into their worlds of overstored local markets, aggressive and diversified competition and an economy that’s still not healthy.

I believe many retailers would agree that consumerism has permanently changed. That means waning customer loyalty, more shopping trips to different retailers and an overall consumer perspective that price has become very important. That equation translated once again to more gains being made by alternate channel retailers (and non-traditional grocers) against the conventional supermarkets, which still dominate the overall food and drug volume but whose composite share continues to decline.

Remaining atop the leaderboard of the $42.8 billion Mid-Atlantic region was Giant/Landover, which increased sales only marginally to $5.67 billion over the past 12 months. Giant’s flat volume can be attributed to the fierceness of its competition, a reduction in cap-ex (during the prior three years the unit of Ahold USA invested $300 million as part of its “Project Refresh” initiative) and the closure of six underperforming stores. The big chain welcomed a new leader as former Aldi and Wal-Mart executive Anthony Hucker became president of Giant in late 2011.

It was bound to happen sooner or later and 2012 is the year that Wal-Mart surpassed Food Lion for the second spot among all food and drug retailers in the Mid-Atlantic. While Wal-Mart’s corporate numbers turned around during the past 12 months, the Bentonville Behemoth performed even better than the norm in the region. It opened/converted three new SuperCenters. Now 76 of its 131 stores operate as combo units. Extrapolated sales for Wal-Mart were $3.6 billion. During the next year, we should also see the debut of several smaller format units in the Mid-Atlantic and the first of six planned stores for the world’s largest retailer in Washington, DC.

Other than A&P and the corporate retail banners of Supervalu, nobody had a more challenging year than Food Lion (Bottom Dollar). The biggest banner in the Delhaize America portfolio not only dropped to third place in the region it shuttered nine stores inVirginiaand eliminated its Bloom banner. Estimated revenue decreased from $3.66 billion to $3.56 billion as the chain found itself losing ground to the diversified competition it faced, primarily in non-rural areas. Earlier this year, Food Lion began a store upgrade and rebranding effort in its Richmond stores, something that will ultimately occur in all Food Lion units. Will that be enough to re-establish Le Lion as a price competitor, or is this a case of “too little, too late”?

Safeway ranked fourth among all Mid-Atlantic retailers with estimated sales of $3.16 billion at its 123 stores. That’s six fewer than last year and, while Safeway is certainly on solid ground in its core Baltimore-Washington market, it has lost some momentum in recent years. Trade observers feel that Safeway waited too long to lower its everyday retail prices and also needs a broader store remodeling effort (although its “on site” replacement initiatives in Georgetown, Bethesda, MD, Olney, MD, etc. have been big winners).

Another Ahold USA division, Giant/Carlisle (Martin’s) remained in fifth place with its 80 units amassing sales of $2.59 billion, up from last year’s $2.57 billion. While Giant/Carlisle’s year was solid, it continued to be challenged in Richmond where it acquired 25 Ukrop’s stores in 2010. And even in its coreCentral PAmarket, intensifying and diverse competition resulted in the retailer’s smallest sales gain in more than 10 years

CVS remained the leading drug store chain in the region. TheWoonsocket,RIbased chain continued to increase its food offerings and rang up estimated sales $2.30 billion at its 467 units.

While it continued to post negative identicals, Shoppers Food & Pharmacy at least staunched the flow heavy sales declines, store closures and market share decreases of the past three years. Still, sales were down an estimated $16 million to $1.76 billion, but the unit of Supervalu did open one new store in the past year – the former Super Fresh unit in Ellicott City, MD. Last month, Shoppers’ president Tim Lowe was moved from his role as president of the regional chain based in Bowie, MD to a new executive merchandising post at Supervalu’s corporate headquarters in Eden Prairie, MN. No new successor to Lowe has yet been named.

Target once again held down the eighth spot with extrapolated food and drug sales of $1.53 billion, up from last year’s extrapolated total of $1.44 billion. The big Minneapolis, MN based mass merchant opened three new units and now operates 103 stores in the Mid-Atlantic. It also continued to convert stores to its P-Fresh model, which incorporates more fresh offerings and an increase in grocery, refrigerated and frozen SKUs as well. Approximately two-thirds of Target units in the region have been transformed into its hybrid model. Earlier this year, Target executives announced they will be slowing down the pace of P-Fresh conversions over the next fiscal year.

Rite Aid remained another retailer in the “have not” zone. With its share price continuing to hover in the $1.25 per share range and its sales continuing to decline, you have to wonder if the Camp Hill, PA drug merchant’s long-term problems are fixable. Operating 380 Mid-Atlantic units (two fewer than last year), Rite posted estimated sales of $1.20 billion, down from $1.25 billion last year. What may be more alarming are the real estate strategies of stronger competitors CVS and Walgreens, which seem eager to locate their stores close to existing Rite Aids (often times at significantly higher leaseholds), and then slowly eat away at Rite Aid’s sales.

Moving into the top 10 for the first time was Harris Teeter, which opened its first Washington area store in 1999 and now also operates organically grown stores in the Tidewater, Charlottesville, Baltimore, and Eastern Shore area. With its 51 stores in total (three more than last year), the Matthews, NC chain rang up estimated sales of $1.18 billion in the Mid-Atlantic, up from $1.08 billion last year.

By class of trade, Giant/Landover (170 stores, $5.67 billion in sales) topped all supermarket retailers; Costco (25 stores $1.03 billion in extrapolated sales) led all club retailers; Wal-Mart (131 stores; $3.58 billion in extrapolated sales) led the mass merchandisers; CVS (467 stores and $2.33 billion in sales) led among the drug chains in the Mid-Atlantic; and 7-Eleven (938 stores and $1.13 billion) paced the c-stores. Additionally the 21 military commissaries rang in sales of $893.3 million

Viewed as a group, the 50 corporate chains in the market operated 4,477 stores and accrued $41.5 billion in sales, good for 97.01 percent of the Mid-Atlantic region’s food and drug sales.

Among all independent retailers (those operating 17 or fewer stores), Baltimore based Mars Supermarkets (17 stores, $215.4 million in sales) continued to lead all non-chain operators in sales. Other independent retailers topping the $100 million sales mark included B. Green (six stores, $140 million in sales); and Karns Prime & Fancy Foods (seven stores and $107.9 million in sales).

As a collective group, the 15 independent retailing organizations in the Mid-Atlantic operated 81 stores which garnered sales of $1.02 billion (up from $966.8 million last year). Independents controlled 2.39 percent of the region’s food and drug revenue.

Food Trade News Market Study:

It was another year when Acme Markets, A&P/Pathmark/Super Fresh and the nearly extinct Genuardi’s were in a giving mood and aggressive retailers such as ShopRite, Giant/Carlisle and Wal-Mart were only too happy to receive their bountiful gifts.

Now, it would be wrong to say that the significant sales and share of market gains made by the new “Big Three” in the $49.5 billion Food Trade News marketing area were achieved solely from these gifts, because all three merchants earned their honors by providing consumers with a “connection point,” in the form of price, overall value, customer service and differentiation.

In a 55 county marketing area that ranged from Northern New Jersey to Central PA and as far south as New Castle County, DE, once again no retailer fared as well as ShopRite. With 1in the region, the members of Wakefern increased their sales to $8.89 billion at 172 stores while dominating the two largest individual markets in the survey – Delaware Valley and Northern New Jersey. By any measure, ShopRite had another spectacular year, seeming unimpeded by the still shaky economy and new and diverse competition. The Keasbey, NJ firm has about a half a dozen new stores in its pipeline, no shortage of existing and potential new members to open stores and an operating model that is among the best in the business. However, beyond the model itself is the talent and ability of the members/owners to execute at a high level and are among the toughest, grittiest and most creative merchants in the entire retail food industry.

After grabbing the number two spot last year from A&P/Pathmark/Super Fresh, Giant/Carlisle shows no sign of giving it up. The large non-union unit of Ahold USA increased its sales $240 million to $4.54 billion while operating 126 stores, three more than last year. And in next year’s study the numbers will continue to grow as Giant/Carlisle will shortly gain control of 15 Genuardi’s stores it agreed to purchase earlier this year.

Wal-Mart moved into third place this year among all food and drug retailers in the densely populated region. The Bentonville Behemoth only operated one net new store this year (Springfield, PA) but converted three other “division one” stores to SuperCenters. Wal-Mart’s estimated extrapolated sales for its 130 units in the 55 county region were $3.32 billion.

“…down, down, down and the flames went higher…” Yes, those are the lyrics of a great Johnny Cash song (“Ring Of Fire”), but they could also describe the recent histories of A&P/Pathmark/Super Fresh (number four) and Acme Markets (plummeting to number seven). Not only did those operators experience another year of poor sales, both retailers once again continued to shutter units. While the Tea Company got a new lease on life as a post-bankruptcy privately-held company with more favorable labor contracts, there’s no tangible evidence that indicates its sales or share of market will increase. Over the past 12 months, A&P closed 17 stores and saw its identical store revenue continue a downward spiral. Now operating 137 units in the region, A&P/Pathmark/Super Fresh rang up an estimated $3.07 billion in annual sales, a decrease of $273 million.

At Acme, which has been hemorrhaging ever since inept parent Supervalu acquired it in 2006, the bleeding was less intense, but the decline continued. Acme operated 106 stores in the market (four fewer than last year) with sales estimated at $2.27 billion, a dip of approximately $81 million. After our market study measuring period ended, (March 31), Acme did name a new president, Keith Wyche, who replaced Dan Sanders (transferred to Supervalu’s Albertsons division in Southern California) and opened its first new store in four years, a replacement unit in Bryn Mawr, PA earlier this month.

Another solid year of growth was achieved by fifth ranked Wawa. The area’s largest convenience chain now operates 479 units in the market that rang up sales of $2.49 billion. Later this year, Wawa will open its first c-store in Florida and at the end of 2012, its talented chief executive Howard Stoeckel will retire to be replaced by 15 year Wawa executive Chris Gheysens.

CVS remained the biggest drug chain in the market, now operating 581 stores, 28 more than last year. Estimated revenue at those units is $2.45 billion. CVS (and Walgreens) again made gains at the expense of eighth ranked Rite Aid, which continued to struggle on virtually every front. The Camp Hill, PA drug merchant operated14 fewer units this year (629) and saw sales dip to an estimated $2.08 billion from $2.19 billion last year.

Increasing sales about $50 million to $1.79 billion this year were the 61 Stop & Shop stores in New Jersey. That’s a gain of five stores netted in the acquisition of Norkus Food Town, but trade observers felt that Stoppie should have done better, given the instability of A&P in its core trading area. Late last year, the division of Ahold USA made a change at the top, replacing popular Ron Onorato (who remains with AUSA) with veteran Don Sussman., a metro New York native.

Rounding out the top 10 in the nearly $50 billion market was Weis Markets which enjoyed a very good year under the leadership of CEO Dave Hepfinger. The Sunbury, PA merchant operated 100 stores in the region which amassed sales of $1.77 million, an increase of $30 million over 2011.

In addition to Genuardi’s announced withdrawal from the Delaware Valley market and the restructuring of A&P, other changes that affected retailers in the market included Jim Sinegal retiring as CEO of Costco (replaced by Chris Jelinek), the growth of Bottom Dollar Foods (a unit of Delhaize America), the conversion of several Fresh Grocer units to Save-a-Lot stores (including additional new Save-A-Lot stores) and the emerging power of Walter Robb as co-CEO of Whole Foods, the retailer with sales and earnings that have put it at the top of the class of publicly-traded retailers.

Taken as a group, the 64 retailers in the survey operated 4,762 stores with sales of $49.2 billion, which represented 99.6 percent of the grocery, HBC, general merchandise, pharmacy, tobacco and floral products in the Food Trade News marketing area.